Gold jumped back above 4,000 dollars an ounce on Wednesday, extending gains in midmorning European trade as the dollar softened and Treasury yields fell after Democrats swept the US midterm elections. Gold futures climbed 2.8 percent to 4,052.50 dollars a troy ounce, silver futures gained 4.7 percent to 52.11 dollars and platinum rose 2.4 percent to 1,464.10 dollars, Dow Jones Newswires reported. The site market tables match the move, with gold at 4,052.7 dollars, up 2.85 percent, and silver at 52.08 dollars, up 5.03 percent.
The driver was the election read through fiscal policy. Ole Hansen of Saxo Bank said gold rallied on expectations that a Democrat controlled Congress could constrain President Trump’s fiscal agenda and limit further deficit expansion. The dollar index fell 0.5 percent to 101.31, making dollar denominated bullion cheaper for overseas buyers, and Saxo pointed to short covering on top of the weaker dollar and lower yields.
The rebound sits against a still hostile rate backdrop. Before the war began in late February, gold traded above 5,000 dollars an ounce; it dropped below 4,000 dollars in late October as soaring energy costs raised expectations of further rate hikes. Traders are still pricing a probability of nearly 83 percent of a Federal Reserve rate increase in December, according to CME FedWatch data cited by Dow Jones, which raises the opportunity cost of holding a non yielding asset.
That tension is the story for the next session. The official sector bid documented on Tuesday, with central banks buying 321 tonnes in the third quarter, provides a floor, while consumer demand is weakening at these prices, most sharply in India. Friday’s US nonfarm payrolls report is the next cue for the rate path that has been setting bullion’s ceiling.